Sinopec Sinks on Discount as Youku Slips: China Overnight
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. fell 3.1 percent to 97.87 yesterday, the lowest level this year. American depositary receipts of Sinopec, Asia’s biggest refiner, slipped the most in a year, while video company Youku Tudou posted the biggest drop in two months after Maxim Group LLC cut the stock to sell from hold. Sohu.com Inc. (SOHU) slumped the most since April after forecasting first quarter net income that came below analysts’ estimates.
Sinopec, which has rallied 35 percent from a Sept. 6 low in Hong Kong, plans to raise about HK$24 billion ($3.1 billion) selling so-called H shares at $8.45 apiece, a 9.5 percent discount to the level they closed at yesterday. The Beijing- based company -- which will use the cash for “general corporate purposes,” according to the filing -- may buy $8 billion of assets outside of China from its parent, the Wall Street Journal reported last month.
“Usually a discount is offered when the market is bad and this one is a bit too big given their share prices have posted quite some gains since September,” Michael Ding, lead manager of the China Region Fund (USCOX) at U.S. Global Investors Inc., which oversees $2.2 billion, said in a telephone interview from San Antonio, Texas. “It looks like they need funds for investment and working capital.”
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., lost 2.8 percent to $40.63, the biggest drop since June. The Standard & Poor’s 500 Index (SPX) declined 1.2 percent to 1,495.71 after data showed American factory orders rose less than estimated in December.
Sinopec’s ADRs dropped 7.2 percent to $112.57, the biggest slump since Feb. 21. Its ADRs, each representing 100 underlying shares, traded 6.6 percent below its Hong Kong stock, the widest discount since December 2008.
The company plans to sell 2.85 billion new shares, or 3.2 percent of total outstanding stock, before Feb. 14, according to a filing yesterday. The shares will also be offered in the U.S. to qualified institutional buyers, it said in a separate statement. Beijing-based Sinopec last offered new equities raising HK$10.7 billion in March 2005, data compiled by Bloomberg show.
Youku Tudou, formed from a merger of China’s biggest video websites, tumbled 7.2 percent to $21.59, losing the most since Dec. 4. Tudou will probably add 20 percent sales growth to the combined company this year while its costs may increase by 50 percent, making profitability unlikely before 2014, Echo He, an analyst in New York at Maxim, wrote in an e-mailed report yesterday.
Sohu, a Beijing-based operator of games and video websites, slid 5.6 percent to $46.49 in New York, the largest decline since April.
The company forecast adjusted earnings of as much as 55 cents per share for the first quarter, according to a statement yesterday. That was below the 77-cent average estimate of five analysts surveyed by Bloomberg. Sohu’s fourth-quarter net income dropped 8 percent to $23 million, the company said, compared with a $21.2 million average of seven analysts’ estimates compiled by Bloomberg.
Sohu said first-quarter sales may rise as much as 32 percent from a year earlier to $299 million, more than the $280 million average by analysts.
The company’s price estimate was lowered to $56 from $62 yesterday at JPMorgan Chase & Co.
Baidu Inc. (BIDU), owner of China’s most-used search engine, declined 6 percent to $102 after the close of trading yesterday. The Beijing-based company forecast first-quarter sales will rise at least 38 percent to $945.4 million, compared with a $967 million mean projection of 10 analysts in a Bloomberg survey. Its fourth-quarter profit of $1.28 per ADR was in line with estimates.
Implied volatility, the key gauge of options prices, for one-month contracts closest to Baidu’s ADRs was 5 points higher than that for Sohu Jan. 29, the widest gap since January 2011, data compiled by Bloomberg show. Investors are concerned rising costs and competition will erode profit, Ming Zhao, founder of 86Research Ltd., the Beijing-based equity research firm, said in a phone interview Feb. 1.
E-House China Holdings Ltd. (EJ), a Shanghai-based property agent, slid for a fifth day, dropping 5.5 percent to a one-month low of $4.6. Suntech Power Holdings Co., the world’s biggest solar-panel maker, tumbled 7.6 percent to $1.58, the biggest loss since Jan. 7.
Yingli Green Energy Holding Co., the world’s biggest silicon-based solar panel maker by capacity, added 1.3 percent to $3.09, the highest since May 16. The Baoding, China-based company has supplied 65 kilowatts of photovoltaic modules to Jordan’s Kawkabuna for Energy Solutions, it said yesterday in a statement. That is Yingli’s first order in the Jordanian market.
New Phoenix Media Ltd. (FENG), the Beijing-based Internet, TV and mobile-news provider, climbed 2.2 percent to $3.66 yesterday in New York, the highest level in three months.
Intel Corp., the Santa Clara, California-based chipmaker, owned 5.4 percent in New Phoenix shares by the end of 2012, the U.S. company said in a regulatory filing yesterday.
ADRs of Zoomlion Heavy Industry Science & Technology Co., China’s second-biggest construction-equipment maker, dropped 4.7 percent to $13.15 in U.S. over-the-counter trading, the largest slump since Oct. 25.
The company denied allegations in a press article published yesterday that it had reported fictitious sales and falsified accounts, according to its filing to the Hong Kong stock exchange.
Thirty-day volatility on the China-US gauge rose to 19.4 yesterday, the highest level since Dec. 10 and compared with an average of 18.3 over the past six months. The Bloomberg Chinese Reverse Mergers Index (CHINARTO), which tracks a basket of companies that gained U.S. listings after buying firms that already trade, retreated 1.3 percent from a nine-month high to 79.1.
The Hang Seng China Enterprises Index (HSCEI) dropped 0.5 percent to 12,156.58 yesterday, after rallying 1.8 percent last week. The Shanghai Composite Index (SHCOMP) of domestic Chinese shares gained 0.4 percent to 2,428.15, climbing for a sixth day in the longest stretch of gains since Feb. 28 last year.
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